Banco Macro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's third quarter 2022 earnings conference call. We would like to inform you that this third quarter 2022 press release is available to download at the investor relations website at Banco Macro at www.macro.com.ar.french slash relations base infrasource. Also, this event is also being recorded and all participants will be in a listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star, then zero to signal the operator. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge Scaramucci, and Chief Financial Officer, Mr. Nicholas Torres, Investor Relations. Now I would like to turn the conference over to Mr. Nicholas Torres. You may begin your conference, sir. Thank you.

Good morning, and welcome to Banco Macro's third quarter 2022 conference call. Any comment we may make today may include forward-looking statements, which are subject to various conditions. And these are outlined in our 20F, which was filed to the SEC, and it's available at our website. So quarter 2022 press release was distributed last Wednesday, and it's also available at our website. All figures are in our Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period. As of 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29, as established by the Central Bank of Argentina. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through September 30, 2022. I will now briefly comment on the bank's third quarter 2022 financial results. Bank of Macro's net income for the quarter was 8.9 billion pesos, 76% higher than the second quarter of 2022, and 34% lower than the result posted a year ago. As of the third quarter of 2022, the bank's accumulated annualized ROE and ROA of 7.7% and 1.9% respectively remained healthy and showed the bank's earnings potential. Net operating income before general and personal expenses in the third quarter of 2022 was 122 billion pesos, 22% or 22 billion pesos higher quarter-in-quarter due to higher income from financial instruments at fair value for profit or loss and higher FX gains. On a yearly basis, net operating income increased 54% of 42.6 billion pesos into higher income from financial instruments at fair value for profit and loss and higher FX gains. Operating income after general and initial expenses was 75.1 billion pesos, 39% of 21 billion pesos higher than the second quarter of 2022 and 101% of 37.7 billion pesos higher than the third quarter of 2021. In the quarter, net interest income totaled 63.5 billion pesos, 3% or 2.1 billion pesos lower than the result posted in the second quarter of 2022, about 17% or 9 billion pesos higher than the result posted one year ago. In the third quarter of 2022, interest income totaled 137.2 billion pesos, 17% or 20 billion pesos higher than the second quarter of 2022, and 50% or 45.8 billion pesos higher than the previous year. Within interest income, interest and loans totaled 55.5 billion pesos and increased 9% of 4.6 billion pesos quarter-and-quarter, mainly due to a 324 basis points increase in the average lending rate. Interest and loans increased 22% or 9.8 billion pesos year-on-year. In the third quarter of 2022, interest and loans represented 40% of total interest income. Net income from government and private securities increased 19% or 12.2 billion pesos quarter-and-quarter, due to higher income from government securities. Compared to the third quarter of 2021, net income from government private securities increased 86% of 36 billion pesos. In the third quarter of 2022, income from brief was totaled 3.9 billion pesos, 358% or 3 billion pesos higher than in the previous quarter, and 3% or 107 million pesos lower than a year ago. In the third quarter of 2022, FX gains, including investments in derivative financing, totaled 16 billion pesos gain, 9.5 billion pesos higher than in the second quarter of 2022, and 15 billion pesos higher than the previous year due to the bank's long dollar position and the peso depreciation during the quarter. In the third quarter of 2022, interest expenses totaled 73.7 billion pesos, 43% of 22.1 billion pesos increase compared to the second quarter of 2022, and 100% of 36.8 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits increased 45% of $22.4 billion quarter-on-quarter, mainly driven by a 950 basis point increase in the average interest rate paid on deposits, while the average volume of private sector deposits increased 6%. On a yearly basis, interest on deposits increased 106% of $37.2 billion. In the third quarter of 2022, interest on deposits represented 98% of the bank's financial expenses. In the third quarter of 2022, the bank's net interest margin, including FX, was 28.1%, higher than the 24.7% posted in the second quarter of 2022 and the 19.1% registered in the third quarter of 2021. In the third quarter of 2022, net fee income totaled 14.2 billion pesos, 2% or 315 pesos million lower than in the second quarter of 2022. On a yearly basis, net fee income decreased 1% or 80 million pesos. In the first quarter of 2022, net income from financial assets and liabilities at fair value to profit or loss totaled 25.5 billion pesos gain, 183 or 16.5 billion pesos higher than in the previous quarter. This increase is mostly related to higher income from government securities, which increased 416% or 14.7 billion pesos. On a yearly basis, net income from financial assets and liabilities at fair value to profit or loss increased 304% or 19.2 billion pesos. In the quarter, other operating income totaled 3.7 million pesos, 20% or 911 million pesos lower compared to the second quarter of 2022. On a yearly basis, other operating income increased 16% of 517 million pesos. In the third quarter of 2022, Banco Marcos personal and administrative expenses totaled 26 million pesos, 3% or 854 million pesos lower than the previous quarter. Personal expenses decreased 4% while administrative expenses remained unchanged. On a yearly basis, personal and administrative expenses increased 5% or 1.2 million pesos. As of the third quarter of 2022, the efficiency ratio reached 29.1%, improving from the 31.2 posted in the second quarter of 2022. In the third quarter of 2022, expenses decreased 3%, while net interest income plus net fee income plus other operating income increased 23% compared to the second quarter of 2022. In the third quarter of 2022, The results from the monetary position totaled 58.3 billion pesos loss, 25% or 11.7 billion pesos higher than the loss posted in the second quarter of 2022 due to higher inflation observed in the quarter. 467 basis points above second quarter 2022 level. Inflation was 22% in the quarter compared to 17.3 in the second quarter of 2022. In the third quarter of 2022, Bank of America's expected tax rate was 46.7%, and more information is provided in note 22 in our financial statements. In terms of loan growth, the bank's financing to the private sector totaled 507 billion pesos, decreasing 7% of 37.2 billion pesos quarter-on-quarter, and 9% of 53.1 billion pesos lower year-on-year. Within commercial lending, overdraft and debt loans stand out, with an 18% decrease and 9% increase respectively. Meanwhile, within consumer lending, personal loans decreased 4%, while credit card loans decreased 6%. Within private sector financing, PESA financing decreased 6% or 33.3 billion pesos, while U.S. dollar financing decreased 26% or $63 million. It is important to mention that Bank of America's market share over private sector loans as of September 2022 reached 7.3%. On the funding side, Total deposits total 1.1 trillion pesos and increased 7% or 77.7 billion pesos quarter-on-quarter and 13% or 132.1 billion pesos higher year-on-year. Private sector deposits increased 5% quarter-on-quarter, while public sector deposits increased 32% quarter-on-quarter. The increase in private sector deposits was led by time deposits, which increased 7% of $34.5 billion, while demand deposits decreased 5% or $21.4 billion. Within private sector deposits, PESA deposits increased 10% or $94.3 billion, while U.S. dollar deposits decreased 45% or $289 million. As of September 2022, Bank of America's transactional accounts represented approximately 43% of total deposits. Bank of America's market share over private deposits as of September 2022 totaled 6.5%. In terms of asset quality, Bank of America's non-performing total financial ratio reached 1.27%, and the current ratio measured as total allowance under expected credit losses over non-performing loans under central bank rules totaled 153.13%. Consumer portfolio non-performing loans were unchanged at 1.23%, while commercial portfolio non-performing loans increased 15 basis points in the third quarter of 2022. In terms of capitalization, Banco Macro counted an excess capital of 351.9 billion pesos, which represented a total capital ratio of 40.4% and a tier one ratio of 36.1%. It should be noted that on May 12th, the Superintendents of the Central Bank Republic of Argentina In fact, it has decided to authorize Banco Macro to distribute profits in cash and or in kind for an aggregate amount of 19.7 billion pesos. And the distribution should be carried out in 12 monthly equal and consecutive installments. As of this date, the bank has paid 11 installments and will pay another one in December. The bank's aim is to make the best use of this excess capital. The bank's liquidity remains more than appropriate, liquid assets, total deposit ratio, reached 90%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remains under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep a well-atomized deposit base. At this time, we would like to take the questions you may have.

At this time, we're going to open it up for questions and answers. If you would like to ask a question, please press star 1 on your touchtone phone. Please unmute your phone and record your name clearly when prompted. One moment, please, for the first question. And the first question will come from Alonzo Garcia with Credit Suisse. Please go ahead.